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IAG challenges rival Suncorp with life insurance

Eric Johnston

Under the move, IAG will repackage life insurance sold by third-party provider TAL. Photo: Jim Rice

INSURANCE Australia Group is attempting to take on rival Suncorp by including the cross-selling of life insurance alongside the sales of its traditional car and home insurance policies.

The push into life comes as insurers are looking to move into faster-growing financial services areas, with sales growth from traditional car and home policies remaining subdued.

Under the move, IAG will repackage life insurance sold by third-party provider TAL. Until last last year, TAL was known as Tower Australia. IAG will initially sell the life under its NRMA policy in New South Wales, before rolling it out to other states. In Victoria, an insurance venture with motoring group RACV already sells life policies.

IAG's chief of direct insurance, Andy Cornish, said it made sense to move into life insurance sales with customers demanding a broader range of insurance products. Life insurance in Australia is traditionally sold through superannuation funds, while financial planners sell the more complex products.

Suncorp, which sells insurance under the GIO and AAMI brands, already distributes life insurance through its own in-house life insurance arm.

Separately, analysts have speculated that IAG could look to boost its stake in its Indian joint venture with a shake-up in rules allowing offshore companies to increase their investment in domestic insurers.

India's federal cabinet has allowed foreign direct investment in insurance companies to lift from 26 per cent to 49 per cent. However, the change still needs to be approved by the Indian parliament.

IAG currently has a 26 per cent stake in its Indian insurance joint venture with State Bank of India. IAG executives have previously said they would be open to increasing the insurer's stake in the venture if ownership limits were increased. IAG initially invested $100 million for the 26 per cent stake.

Deutsche Bank analyst Kieren Chidgey said while the green light on the foreign investment rule changes from the Indian cabinet was a positive move, there was still some way to go given opposition parties generally appear to be against the proposal.

Even so, Mr Chidgey said he believed IAG was likely to build up its capital over the next months rather than undertake special dividends or share buybacks.